European shares rise to six-week high

* FTSEurofirst 300 rises 1.8 pct; gains for 6th straight day

* Up 4.7 pct this week, biggest weekly gain in nearly 8 mths

* Financials, miners in demand; food producers lose appeal

By Atul Prakash

LONDON, March 5 (Reuters) - A smaller than expected drop in U.S. jobs in February and easing concerns over the fiscal situation in Greece helped lift European share prices to six-week highs on Friday, with banks building on recent gains.

Investors' appetite for risky assets such as equities rose, with the VDAX-NEW volatility index .V1XI hitting its lowest in nearly two years. The lower the index, which is based on sell and buy options on Frankfurt's top-30 stocks <0#.GDAXI>, the higher the market's desire to take more risk.

The pan-European FTSEurofirst 300 .FTEU3 index rose for a sixth straight day to end 1.8 percent higher at 1,054.55 points after touching 1,054.60 -- the highest since Jan. 21. The index recorded its biggest daily gain in three months and rose 4.7 percent for the week, the biggest weekly rise since mid-July.

The index, which gained 26 percent last year, is up more than 63 percent since hitting a record low in March 2009. Volumes were 101 percent of the 90-day daily average.

Banks were the top gainers, with the STOXX Europe 600 banking index .SX7P rising 3.1 percent, its biggest one-day gain in four months. Standard Chartered (STAN.L), HSBC (HSBA.L), Barclays (BARC.L), BNP Paribas (BNPP.PA), Societe Generale (SOGN.PA), Allied Irish Banks (ALBK.I) and Bank of Ireland (BKIR.I) rose 2.5 to 14 percent.

"Every (item of) positive news is welcome, and the (U.S.) non-farm payrolls figures are certainly quite helpful," said Gerhard Schwarz, head of global equity strategy at UniCredit in Munich.

"We are in a situation where the market is seeing that fears are calming down concerning Greece as we have seen two important milestones, the austerity package and the issuance of the 10-year bond, which alleviate funding concerns to some extent."

Greece's hopes of solving its debt crisis got a boost when it attracted heavy demand for the sale of a bond issue on Thursday, but an opinion poll showed the government faces stiff opposition to planned austerity measures.

Germany and the chairman of the group of countries using the euro had ruled out granting any immediate financial aid for Greece ahead of talks on Friday with Prime Minister George Papandreou. [ID:nLDE6240M8]

ECONOMIC FIGURES SUPPORT

On the macroeconomic front, data showed U.S. employers cut a smaller than expected 36,000 jobs in February, leaving the national unemployment rate steady at 9.7 percent, bolstering views the labour market was on the brink of creating jobs. [ID:nN04252324]

"Many now believe that if we can get a good number with so much going against it, then March and April will start to show some significant improvements in the employment situation and in turn lead many to believe that economic recovery has shifted up another gear," said James Hughes, analyst at CMC Markets.

The mining sector was the second biggest gainer, with STOXX Europe 600 basic resources index .SXPP rising 3.3 percent after strong gains in metals on improving economic outlook.

BHP Billiton (BLT.L), Anglo American (AAL.L), Antofagasta (ANTO.L), Rio Tinto (RIO.L), Xstrata (XTA.L) and Eurasian Natural Resources (ENRC.L) rose 2.4 to 5.6 percent.

Analysts were positive on the near-term outlook.

"As long as we don't have to really question the earnings outlook, the valuation side will still lend us some support here," said Schwarz of UniCredit.

The trailing price-to-earnings ratio on the STOXX Europe 600 .STOXX was 14.7 times earnings, down from 15.6 times at the start of the year, but sharply up from 7.2 times a year ago.

Thomson Reuters Proprietary Research showed that about 240 companies in the STOXX 600 had reported Q4 results, with nearly half reporting earnings above analysts' expectations.

The technical picture also looked positive, with the FTSEurofirst 300 clearly breaching this week the Fibonacci resistance of around 1,023 points -- its 38.2 percent retracement of the major fall from July 2007 to March 2009.

Food producers, generally seen as defensive plays, lost appeal as risk appetite grew. Nestle (NESN.VX), Nutreco (NUTR.AS) and Kerry Group (KYGa.I) fell 1.2 to 2.1 percent.

Volkswagen's (VOWG.DE) ordinary shares jumped 7.7 percent after Citigroup upgraded Europe's biggest carmaker to a "buy". [ID:nLDE6240KR] (Editing by Greg Mahlich)